Competitive energy markets: What went wrong in Mass., and why we’re taking a stand

Team Arcadia Power

Eighteen U.S. states have competitive electricity markets, where customers can “shop around” for a power provider. These markets were supposed to introduce more consumer choice and cheaper energy through the promise of competition. Clean energy advocates were also hopeful that it would increase demand for renewables. If last week’s headlines are any indication, things haven’t quite worked out as planned.

Before we dive in further, let’s define a few key terms that are important to understand:

Retail supplier: A company that sells electricity in a competitive energy market.

Utility: A private company supplying water, gas, electricity, or the like, which is granted a monopoly by the government and then regulated by the government.

Standard offer service (SOS): Electricity supply service that is provided by a regulated utility to an electric customer who has not selected a competitive energy supplier.

Variable rate: Variable rates change over time based on the wholesale cost of electricity.

Fixed rate: Fixed-rate plans will not change over the entirety of your plan contract. These are the rates that Price Alerts will find for you.

In a competitive electricity market, anyone has the opportunity to stay with their electric utility and receive the standard offer **service** or choose from a competing group of retail suppliers to receive their electricity service at a new variable rate or **fixed rate**. And late last week, the Massachusetts Attorney General issued a scathing report on the competitive energy market in Massachusetts, calling for an end to it altogether.

The new report, “Are Consumers Benefiting from Competition?”, spotlights how competitive market players have targeted low-income, elderly, and minority residents with false promises of cheaper electric bills, and reveals that customers who switched to a new plan on the competitive market paid nearly $177 million more than if they had stayed with their standard electric utility company.

Let’s put it this way - If you had been living in Boston in 2016 and had decided to choose a new, lower cost electricity plan on the open market because money was tight, it’s entirely possible that you actually ended up spending $226 a year more than if you had never switched at all.

How did a market that was designed to improve our power experience become so deceitful that a state Attorney General wants to shut it down completely? Is this happening in all U.S. competitive electricity markets?

When we released our Price Alerts program in December 2017, we embarked on a mission to use our technology to secure exclusively low, fixed rates for our members in these competitive markets. Large companies like Amazon and Google have had personal energy “brokers” working to find them excellent rates in the electricity market for years, and we wanted to do the same for the everyday homeowner and renter.

In order to get started, we took a close look at the rates our members were currently on.

MEMBERS ON RETAIL SUPPLY PLANS

We discovered that our members in Ohio, Illinois, D.C., and Maryland on retail supply contracts were, on average, paying a 27 percent higher rate than they could have been. Additional findings included:

Some of our members were paying over 50 percent higher retail supply rates.

Arcadia Power members in the same states who were on standard offer services were also paying higher rates, about 4 percent higher than what we were able to find them.

We quickly switched all of these members over to new, lower fixed-rate plans and they will start to see savings immediately. Even better, they don’t have to worry about their fixed-rate plan switching to a variable rate one without them noticing—a common tactic of most retail suppliers who offer a low teaser rate, which they hike up once the customer stops paying attention. Our platform will continue to monitor their local energy markets to make sure they stay on lower fixed-rate plans.

Shutting down competitive energy markets isn’t the solution, innovation is. The energy industry has left it to the consumer to figure out what a kWh is, how many to use, and what exactly a ‘variable rate’ is based on. It’s not surprising that reports continue to find that people are being tricked into high-prices and hard-to-understand contracts.

Competitive electricity markets have been working well in the commercial and industrial sectors – because companies have the resources to understand what they are buying into. Everyone else should have the same resources they need to make smart, informed electricity plan decisions for their daily lives. Mint.com tells us how much we’re spending, Uber and Lyft get us where we’re going and tell us how long it’ll take, and Amazon simply helps us do everything better and faster. It’s time for the energy industry to step up.

If you live in a competitive electricity market, there are steps you can take to make sure that you don’t fall victim to high-cost retail supply contracts.

Always look at contract terms. Look into what kind of commitment you are making. Is the contract rate for one year? Four years? Is it a variable or fixed rate? Is there a cancellation penalty? To prevent falling victim to any of these,sign up for Price Alerts today. We’ll monitor your local energy market and make sure that:

We always find you a lower fixed rate for energy when available.

You never have to deal with binding contracts, commitments or variable rates.